the critical value x will be higher ([x.sup.2,DP] > [x.sup.1,DP]), more investors will follow the delay purchase strategy, and the
order imbalance on the ex date from these investors will be larger.
Section II defines the measurement of
order imbalance and presents our empirical findings.
They argue that an
order imbalance in response to the call announcement leads to a temporary price decline, which is followed by a price rebound.
A convenient summary statistic for this
order imbalance is the order flow ratio used by Lease, Masulis, and Page |32~.
Order imbalance is known to affect stock returns (Chordia, Roll, and Subrahmanyam, 2002; Chordia and Subrahmanyam, 2004).
"There is going to be a gigantic
order imbalance when they (markets) restart.
Chan et al (2005) also use transaction data and not only find evidence of the magnet effect on the KLSE, but also explicitly test how the magnet effect occurs through
order imbalance (1).
Nevertheless, the rumors sent Seagram's stock price up $2.62 to $40.12, amidst trading so heavy that the stock was temporarily halted while an
order imbalance was cleared.
Rather, it varies depending upon the time of day, order price and size, market congestion, trader type, firm size,
order imbalance, and technology used for submitting an order.
The investigations in this paper focus on the effects of quote competition on the
order imbalance. The reason to examine
order imbalance is simple.
For example, Hopewell and Schwartz (1976, 1978) conclude that suspensions are (1) usually associated with a permanent change in price in response to the news and
order imbalance, and (2) suspensions allow wide price changes in the context of the specialist maintaining an orderly market.